Front Money Agreement
February 26, 1998
Dear Mr. :
1. We plan to organize a limited partnership (the "Partnership") under the laws of the State of New York to develop, present and produce in New York City and elsewhere a theatrical stage play, tentatively entitled "xxxxxxxxx" by xxxxxxxxxxxxx hereinafter referred to as the "Play," to which we shall have obtained dramatization rights. We are the anticipated general partners of the Partnership, although others may be admitted as such. The limited partners of the Partnership will share pro-rata in fifty-percent (50%) for the net profits of the Partnership, and the general partners will receive fifty percent (50%) of such net profits after recoupment, all to be defined in the Partnership agreement. The amount of capital to be raised by and for the Partnership shall be less than $200,000.
2. You have agreed to advance to us the sum of $30,000 which shall constitute front money. We shall hold said sum in a separate bank account with any other front money, in trust with the right to use the same immediately only in connection with pre-production and production purposes: for example, fees, advances, deposits or bonds made for the purpose of purchasing options on the Play, and other underlying materials (if any), engaging creative personnel, securing a theatre, retaining legal, accounting and other professional advisors, preparing offering documents, the costs of workshop or other purposes reasonably related to the production of the project including travel, lodging and meals for us and our affiliates, and the reimbursement to us of any such expenses.
(a) In consideration of the foregoing, if and when the Partnership is formed, and the offering of Partnership interests is allowed to commence, you shall be designated as a limited partner thereof, to the extent of the amount of front money so advanced by you, and you shall be entitled to such portion of the limited partners' share of the net profits of the Partnership as your investment bears to the total capital raised for the production of the Play. For example, you will receive ten (10%) percent of the net profits of the Partnership, if any, if an offering of $150,000 of Partnership interests were to be made.
(b) In addition, you shall be entitled to an interest in the Partnership's net profits equal to one quarter your aforementioned portion of the limited partners' share of the net profits of the Partnership, but payable only from the general partners' share of such net profits as, when and if received by the general partners (and subject to all rights of refund, rebate and return as are applicable to the general partners' share under the Partnership agreement).
(c) If you elect not to be designated as a limited partner of the partnership, prior to exercising your option to be so designated, you will (a) receive a full refund of your front money contribution, without interest, in the event and at such time as the Partnership is fully capitalized; and (b) in lieu of the consideration referred to in Subparagraphs "a" and "b" of this Paragraph "2", you will be entitled to receive one quarter of such portion of fifty percent (50%) of the net profits of the Partnership as your front money contribution bears to the total capital raised for the production of the Play, but payable only from the general partners' share of such net profits as, when and if received by the general partners (and subject to all rights of refund, rebate and return as are applicable to the general partners' share under the Partnership agreement).
3. You understand that the front money advanced by you is high-risk capital and that if the project is abandoned, at any stage, for any reason whatsoever, our only obligation will be to account to you for the funds spent, and to return to you, and the other parties advancing money that can be used before the project is fully capitalized, any unused balance of such funds on deposit, pro-rata and pari passu, subject to the provisions of Subparagraph "2(c)" hereof. We agree to furnish you with an accounting of all such funds advanced to us but not more than once every six months and then only until such money has been fully expended, or the project abandoned.
4. At such time, if any, as the Partnership is to be formed and you elect to be designated as a limited partner hereof, you hereby irrevocably authorize, nominate, and appoint Randall L. Wreghitt as your attorney-in-fact to execute the Partnership agreement on your behalf, to the extent of the amount of front money advanced by you under Paragraph "2" above, and to take any and all further steps which we may deem necessary or appropriate to effectuate your investment in the Partnership in accordance with the foregoing provisions. You will be furnished with a copy of the definitive offering documents, if required by law, the Partnership agreement and any other offering material, if required by law, at that time.
5. You are aware that while offering literature may be filed with the Securities and Exchange Commission and the Department of Law of the State of New York, the Partnership's offering has not yet been declared effective or allowed to commence by these securities agencies.
6. Your liability in respect to the Play shall be limited to the amount of front money advanced by you under Paragraph "2" hereof. We agree to indemnify you against any and all claims, liabilities or expenses, including reasonable attorneys' fees, arising out of any claim by third parties asserting that you are liable for any sum beyond such amount.
7. This represents the entire agreement between us, supersedes all prior agreements and may not be changed except by an instrument in writing signed by the party to be charged. This agreement shall be governed by the laws of the State of New York applicable to agreements to be entered into and wholly performed therein. This agreement shall be binding upon and inure to the
benefit of the respective parties, their heirs, executors, administrators, successors, permitted licenses and assigns.
If this letter correctly sets forth your understanding, please sign and return a copy of same.